Salary Bands

Salary bands are defined pay ranges for each combination of role and level (e.g., Senior Software Engineer Level 4: $150K-$200K base). Also called pay bands, compensation bands, or salary ranges. Bands are used to make hiring and promotion decisions systematically rather than negotiating each comp decision from scratch, prevent pay inequity by ensuring similar roles have similar pay regardless of negotiation skill, and provide transparent comp guidance to managers and employees about pay expectations and career progression. Bands are typically structured as a matrix of roles (engineering, sales, marketing, etc.) cross-tabulated with levels (IC1, IC2, IC3... Director, VP, etc.) and refreshed annually based on market data. It is one of the operational disciplines that distinguishes growth-stage from early-stage companies and pays significant dividends in recruiting effectiveness, retention, and pay equity.

The structure of a typical salary band system:

The matrix:

• Rows: roles or job families (Software Engineer, Sales Account Executive, Product Manager, etc.).
• Columns: levels (Level 1 entry, Level 2 mid, Level 3 senior, Level 4 staff/principal, etc.).
• Cells: pay range (typically a 20-40% spread from minimum to maximum, e.g., $150K-$200K).

Components within each band:

• Base salary range: minimum, midpoint, maximum.
• Variable compensation (for sales/some roles): commission structure, bonus targets.
• Equity range: BPS or share count range appropriate for the role/level.
• Total compensation: sum of base, expected variable, and equity (often annualized).

Geographic adjustments (if applicable):

• Bands may have multiple geographic tiers (e.g., San Francisco / NYC, other US, international).
• Tier 1: highest cost markets (SF, NYC, Boston, Seattle).
• Tier 2: mid-cost US markets.
• Tier 3: low-cost US markets or international.

How to set salary bands:

Step 1: gather market data:

• Compensation surveys: Radford, Mercer, Pave, Carta Total Comp, Option Impact provide market data.
• Recruiter intel: recruiters can validate market positioning for specific roles.
• Network data: founders' network can provide informal data on what specific competitors pay.
• Public data: H1B disclosures, levels.fyi, glassdoor for ground-truth on specific companies.

Step 2: define the company's market positioning:

• Where in the market does the company want to sit? (Top of market, median, etc.)
• This decision comes from the compensation philosophy.

Step 3: set initial bands:

• For each role/level combo, set the band based on market data positioned per the philosophy.
• Ensure 20-40% spread within bands (allows differentiation by performance, tenure, negotiation).
• Cross-check for internal equity: similar roles should have similar bands.

Step 4: maintain and refresh annually:

• Update bands annually based on market data and company evolution.
• Communicate changes to managers and employees.
• Use bands consistently in offers and promotion decisions.

How to use salary bands operationally:

• In hiring: offer falls within the appropriate band for the role/level. Negotiation happens within the band, not above it.
• In promotion: promotion to a higher level typically includes a pay adjustment to match the new band.
• In performance reviews: pay increases for high performers move them toward the top of band; lower performers stay closer to band midpoint or minimum.
• In retention: when an employee's pay falls behind band midpoint (because market increased), proactive adjustment maintains retention.

The transparency dimension:

• Full transparency: bands published internally to all employees. Standard at modern tech companies.
• Required external transparency: some jurisdictions (NYC, California, Colorado, Washington) require salary ranges in job postings.
• Manager-only: bands available to managers but not all employees. Less transparent.
• Opaque: no published bands. Increasingly out of step with modern expectations.

What founders get wrong: Operating without salary bands, leading to bespoke comp decisions that produce pay inequity, slow hiring, and frustration. The right discipline: develop bands by Series A or B based on market data positioned per the compensation philosophy, structure them as a matrix of roles × levels with pay ranges, publish internally, and use consistently. Refresh annually based on market changes. The bands become the operational backbone of comp decisions and dramatically improve consistency and equity.

Related: Compensation Philosophy · Employee Equity · Performance Review · Hiring Plan · Offer Letter

FAQ

What are salary bands?
Defined pay ranges for each combination of role and level (e.g., Senior Software Engineer Level 4: $150K-$200K base). Used to make hiring and promotion decisions systematically, prevent pay inequity, and provide transparent comp guidance to managers and employees about pay expectations and career progression.

How do I set salary bands for my company?
Gather market data (Radford, Mercer, Pave, Carta Total Comp surveys; recruiter intel; network data; public sources like levels.fyi). Define market positioning per your compensation philosophy. Set bands with 20-40% spread within each role/level cell. Cross-check for internal equity. Refresh annually based on market changes.

Should salary bands be transparent to employees?
Increasingly yes. Some jurisdictions (NYC, California, Colorado, Washington) legally require salary ranges in job postings. Full internal transparency (bands published to all employees) is standard at modern tech companies and improves pay equity, retention, and trust. Opaque practices are increasingly out of step with employee expectations.